Strategy: Competitive Standards Strategy

While competitors and customers believe in standards that are fair, impartial and open, a company’s competitive interests are often met by seeking unfair, proprietary and closely controlled advantage. Yet the open standards process is valuable to a company in broadening the potential market, building a positive market reputation and building a community of potential customers. The challenge is to participate in and drive standards in a fair, impartial and open manner while internally pursuing an aggressive competitive product, market and standards strategy. This article will discuss:

Value of the Standards Process;

Ethics and the Standards Process;

Challenges of the Standards Process;

Competitive Strategy and the Standards Process.

Value of the Standards Process

“Standards solve issues ranging from product compatibility to addressing consumer safety and health concerns. Only through the use of standards can requirements of interconnectivity and interoperability be assured and the credibility of new products and new markets verified.” IEEE ThinkStandards site

Of the majority of standards we develop for high-tech industries, one fundamental value is that they enable products from multiple vendors to readily interoperate or integrate with each other. Yet standards and standards process contribute significantly more value to a company’s strategic product positioning:

standards broaden markets;

standards drive markets to excellence;

standards foster innovation;

standards enable comparison and differentiation.

While it is often tempting to skip the long standards process and develop proprietary products, history has shown that sales-volume of products based on de jure and de facto standards is enhanced by products provided by other vendors. Some of these products may be competitive, many others will be complimentary. Both competitive and complimentary products contribute to the growth of a broader market for all related products and broader potential demand for individual products (e.g. PC-clone versus Mac market segments).

In addition to creating a broader market, broad adoption of standards-based fundamental functionality helps to drive markets to excellence. Standards reduce development risk and often reduce development cost of compliant products. By reducing integration and interoperability complexity, development efforts can be invested in delivering better products. Even standards-based products must compete in the market-place. Vendors naturally develop proprietary value-added features to gain a competitive advantage. Thus standards often serve to “raise the bar” for competitve products – to the benefit of the customer.

The standards process also contributes to innovation at and below “the bar” through the contributions of multiple participants. The standards process itself is competitive, with multiple vendors vying for inclusion of their basic functionality and exclusion of their competitors functionality. This can result in standards that take a longer-term market perspective with competing vendors trying to ensure their long-term product plans are not compromised by a near-sighted standard. In addition, the standards process attempts to ensure technical competence and correctness of standards through peer-review during the process.

De jure standards processes are designed to be fair, impartial and open. Competing products based on de jure standards allow customers to compare “apples-to-apples” when making purchasing decisions – at least with regard to standards-based fundamental functionality. De jure standards also enable equitable comparison testing of products from multiple vendors. Yet by enabling easy comparison of fundamental functionality, standards also enable companies to more easily highlight their products competitive differentiators.

Ethics and the Standards Process

The standards process contributes to the creation of a common community of technical participants and potential customers. This community can have significant sway over public perception of a company. Ethical participation in open standards can enhance a company’s market reputation and pique customer interest in the company’s products. Unethical behavior in open standards participation can damage a companies reputation and potentially open the company to legal liability.

Most open standards organizations, whether de jure or consortia, operate based on a set of ethical guidelines which include:

consensus-based decision-making;

democratic voting;

transparent deliberations;

openness;

inclusive voluntary participation;

due process to resolve disputes;

impartial operation.

Avoiding conflict of interest (and the perception of conflict of interest) is critical to a company’s standards sucess – even while pursuing a highly competitive standards strategy. This is particularly important when acting both in a standards operational role as well as acting as an individual or corporate representative.

Challenges of the Standards Process

De jure standards take a long time to develop, particularly with respect to fast-moving technical markets.

consensus decision-making can result in lowest-common denominator standards rather than best-in-breed standards;

“voluntary” nature of participation can result in wide-variations in knowledge, skills, effort and contributions by members;

participation of non-contributors and non-stakeholders can slow deliberations (rubber-necker syndrome);

infrequent meetings and poor inter-meeting group collaboration;

multiple venues progressing similar proposals;

prioritizing standards projects within the constraints of an open, concensus-driven process;

some participants attempt to slow the process for competitive gain;

some participants attempt to hobble a developing standard for competitive gain;

some participants attempt to hi-jack a standard entirely for competitive gain.

These various weaknesses in standards processes each present competitive strategic opportunities.

Competitive Strategy and the Standards Process

“The benefits of robust competition stem from strong incentives to innovate, so it should come as no surprise that such benefits tug in a direction opposite to standardization. One should like to win market share by being the best, not by preventing the best from coming to the market. ” Of Standards and Monopolies – Richard Volkman

While competitors and customers believe in standards that are fair, impartial and open, a company’s competitive interests are often met by seeking unfair, proprietary and closely controlled advantage. Yet the open standards process is valuable to a company in broadening the potential market, building a positive market reputation and building a community of potential customers. The challenge is to participate in and drive standards in a fair, impartial and open manner while internally pursuing an aggressive competitive product, market and standards strategy.Technical competence and correctness is critical to the success of a standard in the industry and the market. However, an internal corporate standards strategy has as much, if not more, to do with competitive positioning within the market as with the underlying technology of the standard under development.

Part of the reason that de jure standards take years to develop is that often those standards are being developed for a market in which there are already competing and divergent products. Whether those products preceded the standards effort or are early “jump the gun” standards-based products, many standards participants will have a vested interest in protecting the market position of their existing products.

Standards strategy should be an integral part of competitive strategy, using the standards process to:

create standards based on commodity technologies and fundamental functionality to broaden the market for related value-added products, content and services;

standardize fundamental functionality, highlighting and more clearly differentiating the value-added features of a company’s products;

drive markets to excellence through standards to winnow out less capable vendors and focus potential competition;

deliver open source software for commodity functionality which can hobble the revenue streams of competitors with narrower visions;

gain first-mover advantage once standard has stabilized by driving internal product development in synchrony with standards evolution;

pre-empting the market and potentially create a de facto implementation by “jumping the gun” – delivering products once key functionality is firmly entrenched in the developing standard.

A company can participate in standards in fair, impartial and open manner while pursuing the company’s competitive interests. The open standards process can be used to broaden the market for standards-based and related value-add products. Simply by participating in the process will contribute to a positive market reputation and build a community of potential customers. Effective participation also includes internally pursuing an aggressive competitive product and market strategy while executing a subtle yet aggressive standards strategy.